Payments High-Level

Aligning Your Payment Strategy and Business Model

Your payments strategy should be unique to your business. We’ll help you sort through the tradeoffs to determine the right direction for your business.

The business model and payments strategy

What is a business model? You probably know it even if you don’t put it in these exact terms: the logic of the firm, the way it operates, and how it creates value for its stakeholders. That last part–creating value for its stakeholders—is the part we’re focusing on when it comes to payments.

Think about buying a Starbucks coffee with your phone. You can auto-add to your available balance, pay without digging out your wallet, and quickly move through the line. In a word, it’s seamless. That seamless experience encourages customer loyalty. Starbucks patrons know they can get through the line quickly and easily—and it keeps them coming back. Starbucks knows this, which is why their payments model works as part of their business model.

What kind of payment processing plan would fit your business model and inspire the same loyalty in your customers?

How do you choose the right payments strategy?

There isn’t a one-size-fits-all payments strategy because each one comes with different costs and responsibilities. With every transaction, there’s time spent counting, reporting, and moving the cash to a bank—not to mention the potential time sink of finding missing money.

This is where choosing a strategy comes in, because elements of this process can all be automated, offloading risks and certain elements to a partner. What you choose has its own set of costs, risks, and strategic impact on controlling the customer experience. It’s important to study each option to decide what aligns with your business model.

Below, we’ve assembled a chart of the most common options. Click here for a definition of each player.

Partner Type Characteristics
Merchant Account A financial institution that. . .

  • Connects you to the card networks through a financial institution
  • Minimal attention to the customer experience
Independent Sales Organization (ISO) A software partner with. . .

  • Minimal cost to set up
  • A business referral model
  • ISO provides reporting and operational assistance
Independent Software Vendor (ISV) A software group with. . .

  • Integration to payment technology with a payment processor
  • Reporting through the processor
  • Control of the payment experience
  • Technology integration requirement for onboarding
Payment Facilitator Either choose to partner with an existing payment facilitator*, or become a payment facilitator yourself, and…

  • Assume transaction responsibility
  • Become responsible for sub-merchants including risk, boarding and reporting
  • High-cost of entry
  • Control the user experience
  • Greatest revenue potential

For more on choosing or becoming a payments facilitator, click here.

As you can tell, the more responsibility and cost you incur, the greater your ability to customize the customer experience—and your revenue opportunities grow.

*Leveraging an existing payment facilitator such as a Stripe, WePay or Square, allows you to open a payments program quickly. It also allows you to customize the customer experience. However, your opportunities to generate additional revenue through payments is minimized with this option and therefore this route will not help to increase your company’s value.

Payments Detailed

Should you become a payment facilitator or buy services from an existing one?

Depending on your company’s goals, building or buying your payments system could make more sense.

Share this Article

Was this article helpful? Go ahead and share this resource with your team.

Start building your payments strategy

At any time, we’re ready to help point you in a direction that works for your business. Enter your email address, answer the quick survey questions we send back, and we’ll get you personalized advice.

Start typing and press Enter to search